Walter Energy Inc.
) reported fourth quarter 2012 pro forma loss per share of $1.06
compared with $1.28 per share earned in the year-ago quarter.
Reported loss was wider than the Zacks Consensus Estimate of a
loss of 84 cents per share.
The combination of weak coal sales and mild weather conditions
led to uninspiring results in the fourth quarter.
GAAP loss in the quarter was $1.13 per share compared with
earnings of $1.28 per share in the year-ago quarter. The
difference between pro forma and GAAP figures was due to an 11
cent asset impairment and restructuring charge related to cutback
in spending at the Aberpergwm mine located in the United Kingdom
and a 4 cent charge associated with goodwill impairment.
Walter Energy's 2012 pro forma loss was 49 cents per share
compared with earnings of $5.99 per share in 2011. Reported loss
was substantially lower than the Zacks Consensus Estimate of 73
In 2012, GAAP loss was $16.95 versus earnings of $5.99 per
share in 2011. The difference between GAAP and adjusted figures
was due to an 8 cent gain from discontinued operations and a
$17.53 charge related to asset impairment, restructuring and
Walter Energy's total revenue of $478.8 million in the fourth
quarter decreased 31.9% from $703.0 million in the year-ago
quarter. The quarterly revenue trailed the Zacks Consensus
Estimate by 17.0%. This was due to a 39% fall in metallurgical
(met) coal prices year over year as well as reduction in demand
owing to rise in coal-to-gas switch.
In 2012, the company reported total revenue of $2,399.9
million, down 6.7% year over year from $2,571.4 million in 2011.
The 2012 revenue was below the Zacks Consensus Estimate by
During the quarter, Walter Energy's met coal sales volume
expanded 4.2% year over year to 2.5 million metric tons (MMT)
while full year met coal sales volume jumped 19% to 10.4 MMT.
This was due to the company's effective production management
during the quarter under review.
Fourth quarter hard coking coal ("HCC") production was 2.0
MMT, up 11.1% from 1.8 MMT in fourth quarter 2011. Output from
pulverized coal injection (PCI) stood at 476.0 thousand metric
tons, declining 3% from the year-ago quarter.
In the fourth quarter of 2012, the average cash cost per ton
of low and mid vol HCC was $74.0 and $102.0, while that of
thermal coal and PCI was $64.17 and $125.0, respectively.
Total costs and expenses were $572.2 million, marginally up
from $571.8 million in the year-ago quarter. This was primarily
due to a 27.5% escalation in depreciation and depletion expenses
partially offset by a 5.5% and 13.0% decline in cost of sales and
general and administrative expenses.
Fourth quarter operating loss stood at $93.4 million compared
with profit of $131.2 million in the year-ago quarter. The sharp
decline in sales, not helped by flattish costs, led Walter to
incur a loss this quarter.
EBITDA for the quarter was $7.0 million, down 96.6% from the
fourth quarter 2011.
As of Dec 31, 2012, Walter Energy had liquidity of $445.0
million, including $117.0 million in cash and cash equivalents,
and $328.0 million under its credit facility. The company had a
long-term debt of $2,397.4 million as of Dec 31, 2012 compared
with $2,269.0 million as of Dec 31, 2011.
In 2012, the company reported nearly $392 million in capital
expenditure, a decrease of $23.0 million from the prior-year
For 2012, Walter Energy's targeted capital outlay is set at
approximately $220.0 million.
Other Coal Company Releases
Natural Resource Partners L.P.
) reported adjusted earnings of 58 cents per unit in the fourth
quarter, beating the Zacks Consensus Estimate by 34.9%.
Alliance Resource Partners, L.P.
) reported earnings of $1.87 per unit in the fourth quarter,
outpacing the Zacks Consensus Estimate of $1.32 per unit for the
SunCoke Energy Inc.
) posted fourth quarter earnings per share of 39 cents,
surpassing the Zacks Consensus Estimate of 34 cents.
Walter Energy ended the quarter on a dismal note with flagging
top- and bottom-line results. However, we expect the met coal
business to swing back in the upcoming quarters with coal demand
increasing from the emerging markets of India and China, which
are experiencing supply shortages. Moreover, the company's
aggressive cost containment initiatives will further help
maintain a stable margin.
However, the thermal market is expected to remain lukewarm and
regulatory pressure from environmental bodies will likely present
challenges to the company's growth. Currently, Walter Energy
retains a Zacks Rank #3 (Hold).
Based in Birmingham, Alabama, Walter Energy, Inc. produces and
exports metallurgical coal for the steel industry.
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